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Khosla Ventures invests $5M in Jawbone

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jawbone_silver.jpgBluetooth saved your butt, I joked with Hosain Rahman, CEO and founder of Aliph, a San Francisco-based company which makes the Jawbone line of headsets for mobile phones and computers with amazing noise cancellation abilities, and has just raised over $5 million in funding from Khosla Ventures, a Menlo Park-based VC firm started by Sun Microsystems co-founder, Vinod Khosla.

Jawbone has been an impressive product, but its early critical acclaim never translated into commercial success. Till recently, when the company released its first bluetooth headset, which even at a steep sticker price of $120, is flying off the shelves. The device uses bluetooth chipset from Cambridge Silicon Radio and marries it to its own proprietary noise cancellation technology, which allows almost clear conversations while walking down the busiest of streets.

Technology aside, the bluetooth version of Jawbone got a big push when AT&T decided to sell the device in its wireless stores. Since then Apple and Best Buy have started to stock the headset in their stores. It has been such a hit that Rahman had to go looking for fresh funding. With this round of founding, the company has raised a total of $14 million in its eight-year existence. “This is one of the most exciting companies we have invested in,” says David Weiden, partner with Khosla Ventures. Rahman started the company in 1999, with an idea to license the technology to others, but later changed strategy to making consumer devices.

In a chat this morning, Rahman told us that Aliph is now on track to being profitable, have sold well over 100,000 units. Given how many people I have seen walking around, yakking on the street wearing Jawbone, it seems the number has to be much higher. The Blackberry crowd particularly loves this headset.

This has to be particularly gratifying for Rahman, who is persistent if nothing else. He has been pitching me to write about his company forever, and I kept pushing him away, always telling him, your products (wired ones) are good, just not great. And he kept coming back, with yet another product. The newest Jawbone, however is worth writing about. From packaging to bluetooth pairing, the whole process is something you would expect from Apple, not a little start-up.

Now the trick for Rahman is to take this one-hit wonder and turn it into a stable of successful products. If he doesn’t, then rivals that include everyone from Plantronics, Nokia, and Motorola are lurking, ready to swoop in and steal his lunch.

Question: Do you Jawbone? If not, then what is your favorite headset and why?

Related posts:

* Open Thread: What Bluetooth Headsets Do You Use?

23 Responses to “Khosla Ventures invests $5M in Jawbone”

  1. My experience is you have to have Jawbone set perfectly on your cheek in order to have it work right. It is OK.

    It is no good in a windy enviornment. I am going back to my old standby, the Plantronics 510 with Windsmart and noise canceling. It is more comfortable than the Jawbone. I use a Samsung 610 on Sprints network….

  2. I have been using the Bluetooth Jawbone with a Blackberry 8800 for a couple of months, and it is the best cellular headset (wired or wireless) that I’ve ever used by far. Amazing noise cancellation, I can speak freely in locations impossible any other way even directly into the phone, and echo issues are very, very rare (once or twice that I can remember), and I use the device several hours a day.

  3. The Jawbone is a great product – I’ve tried the Plantronics, the Motorola and the Bang and Olufson bluetooth headset and the Jawbone is much better. I’ve even made conference calls from the floor of a trade show without any problems for the person I was talking too.

    Congrats to Rahman and Patrick and the rest of the team.

    @ Growler – Mike and Czares are right. In a manufacturing business you’ve often got to pay your suppliers before you get paid by your customers, so growth creates a cash flow gap.

  4. Lawrence

    I immediately signed up on the waiting list when I heard the Bluetooth version was coming. I have been a headset junkie of long standing from the original corded Plantronics headsets and then Plantronics’ Bluetooth series starting from the 510, 640, and 655.

    The Jawbone Bluetooth radio beats the Plantronics radios I have experienced hands down. Very fast pairing with my Treo 700p. The Plantronics radios have a noticeable latency. I have also had no problem paring the headset to my Thinkpad allowing me to use this for my Skype and Gizmo Project calls.

    I agree with the comments that like the other headsets that rely on having a good fit in your ear to anchor the device there are stability and comfort issues, but no more than the Plantronics 6XX series.

    I think Aliph can improve their product with some more engineering effort into the earpiece. My primary problem is that I cannot make a good seal and even at the highest volume level on both phone and headset I still have difficult hearing the other person making the terrific noise cancellation technology somewhat moot. I would happily pay for new earpieces or a new version of the headset (so long as the charger does not change as I have already bought extra chargers) that properly addresses this.

  5. Michael Chin

    I just ordered one 3 days ago. I’ve read some good reviews about it. I’ve been using a Motorola headset and also a Plantronics Discovery. Both have been pretty disappointing. People complain all day long about how they can’t hear me, lots of static, etc. My mobile is my primary phone for work so I’m hoping this will work as advertised ;-).

  6. I bought a jawbone headset along with my iPhone and it seems ok. The packaging and overall design are great, definitely. ‘Apple-like’ is apt.

    I’ve never used a bluetooth headset previously but I’ve not been very wowed by the sound quality on my Jawbone. It seems kinda tinny and hollow. That might just be an aspect of bluetooth audio that I have to get used to, though.

  7. Marc Seaberg

    I don’t have the product, but a friend of mine does and claims that it’s similar to other blue tooth devices that don’t stay put in the ear well enough. I’ve had this problem with my bluetooth as well…it seems that at times even the slightest movement of my head, chewing gum even, will cause it to fall out. I don’t understand why someone doesn’t copy my Sony earphones that I use with my iPod while I’m jogging. I could do summersaults and they wouldn’t come out of my ear because of the way they’re designed. Blue Tooth makers should take a lesson from headphone manufacturers in this realm.

  8. They need money to pay their contract manufacturers for larger quantities to be made and sales, support, and engineering staff to expand the brand. Even a profitable company needs working capital and unless the owners are rich or have lots of equity to secure bank funding with then the venture funding markets will be the source of this cash.

    Imagine that you wanted to sell me something and you will eventually make a profit on the sale but in order to sell it to me you need to spend millions of dollars with your suppliers to obtain the things you are selling me. You need the cash to cover your expenses until I pay you. And if you expect to maintain the same level of production you will need to keep that amount of money floating with suppliers.

    If you build your business slowly you can generally skim this cash from your existing profits but when your growth outstrips your internal capital you need to either slow down or fund the growth.

  9. @The Growler
    “We lose money on every sale but make it up in volume”

    I doubt it. This is probably more a case of the time required to recoup production and R&D costs. Cash flow is the number one nagging problem for businesses (See SunRocket), and venture capital is one way to get a nice influx of a large cash sum. I would guess they are needing to invest more money in production or distribution channels to keep up with the high demand for their product.

  10. The Growler

    If they are selling so many units why do they need to raise money? Is this a case of “We lose money on every sale but make it up in volume”?